Firm chiefs ‘stole $600m and spent it like lottery winners’

THE former Tyco International executives accused of pilfering company funds for lavish homes and decadent parties spent the money like lottery winners, but they “didn’t win the jackpot, they stole it” a prosecutor said yesterday.

In opening arguments at the trial of L Dennis Kozlowski, the former Tyco chief executive officer, and Mark Swartz, the company's ex-chief financial officer, prosecutor Kenneth Chalifoux said the men stole $600 million from company bank accounts and lied about their actions.

"These defendants were trusted with the assets of their company, and they abused that trust," Mr Chalifoux said.

While prosecutors consider what happened at Tyco an example of massive corporate larceny, defence attorneys say the executives were being properly rewarded for building Tyco into one of the world's largest companies.

Kozlowski, 51, and Swartz, 45, face larceny charges, enterprise corruption a charge usually aimed at organised crime figures and lesser offences that include filing false business records and conspiracy.

Both could get up to 30 years in prison if convicted.

Prosecutors say Kozlowski and Swartz stole $170m by claiming unauthorised compensation and made another $430m on their Tyco shares by lying about the conglomerate's financial condition from 1995 into 2002.

During opening arguments, Mr Chalifoux said the men stole money even on top of handsome salaries in 2000, Kozlowski was paid $106m and Swartz $54m.

Mr Chalifoux said their alleged thefts tended to mirror that same ratio. From the pool of money they allegedly stole, he said, Kozlowski usually gave himself about twice as much as Swartz.

"They schemed to steal money and cover it up and they were very successful," Mr Chalifoux said.

The pair is expected to argue the millions they are accused of stealing were actually loans and bonuses approved by the board and disclosed to outside auditors. The key to their acquittal will be convincing a jury the company's board knew about the compensation and they deserved the pay.

The Tyco chiefs' luxurious lifestyles first attracted attention when Kozlowski was charged in August 2002 with evading over $1m in New York state sales tax on $13m worth of art including Renoir and Monet paintings he had purchased.

A closer look by the Manhattan district attorney's office and the federal Securities and Exchange Commission later revealed huge expenditures, payments and loans that prosecutors say were illegal.

In a now-famous example, Kozlowski allegedly charged to Tyco at least part of a $2m birthday party for his second wife on the Mediterranean island of Sardinia. The party featured an ice sculpture of Michelangelo's statue David squirting vodka into crystal glasses.

Prosecutors also claim company money was used by Kozlowski to buy a $6,000 shower curtain, a $15,000 umbrella stand, a $17,000 toilette box, a $2,200 gilt metal waste basket, $2,900 worth of coat hangers, and a $445 pin cushion.

Swartz is accused of using millions of Tyco dollars for personal investments and real estate speculation. He allegedly worked with Kozlowski to take millions of dollars in improper bonuses and loans, which he did not have to repay.

Tyco, which has about 270,000 employees and $36bn in annual revenue, makes electronics and medical supplies and owns the ADT home security business. It is nominally based in Bermuda but has its operations headquarters in Exeter, New Hampshire.